State Farm Mutual Automobile Insurance Company v. White et al
Filing
18
ORDER denying 7 Motion to Dismiss; denying 7 Motion to Stay Proceedings Signed by Chief District Judge Louis Guirola, Jr on 02/03/2016 (Guirola, Louis)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY
v.
PLAINTIFF
CAUSE NO. 1:15CV346-LG-RHW
JOHN WHITE, JR.; RITA WHITE;
CHRISTOPHER JOE WILSON; and
BOBCAT TREE WORK, LLC
DEFENDANTS
MEMORANDUM OPINION AND ORDER DENYING MOTION TO DISMISS,
OR IN THE ALTERNATIVE, STAY
BEFORE THE COURT is the [7] Motion to Dismiss, Or In the Alternative,
Stay filed by Defendants John White, Jr., and Rita White, and joined in by
Defendants Christopher Joe Wilson and Bobcat Tree Work, LLC. Defendants
request that the Court abstain from deciding this declaratory judgment action
involving insurance coverage brought by Plaintiff State Farm Mutual Automobile
Insurance Company.
The Court has considered the submissions of the parties, as well as the
factors outlined by the Fifth Circuit for deciding whether to abstain from a
declaratory judgment action, and finds that the Motion should be denied. The
Court will not dismiss or stay this coverage action in favor of the state court action
involving only liability issues.
BACKGROUND
In May 2015, Defendants John and Rita White filed a Complaint against
Defendants Wilson and Bobcat “alleging personal injuries and a derivative claim for
loss of consortium under circumstances caused by alleged negligence, gross
negligence and willful and/or negligent infliction of emotional distress.” (See Am.
Compl. 2 (¶9), ECF No. 3; see also generally State Court Compl., ECF No. 3-1). In
the state court case, the Whites allege that while working for Bobcat, Mr. White
suffered injuries when “a portion of a felled tree collided with the elevated ‘bucket’
of a boom lift that was affixed to a truck and the force of the collision damaged the
bucket in which he stood, resulting in his falling to the ground from an elevation of
sixty-three (63) feet . . . .” (See Am. Compl. 2-3 (¶¶ 10-11); State Court Compl. 2-3
(¶¶ 5-6), ECF No. 3-1). The Whites further allege that “Wilson is the owner and
manager of Bobcat . . . .” (See State Court Compl. 1-2 (¶2), ECF No. 3-1).
Wilson had a commercial automobile liability insurance policy through State
Farm (“the Policy”). Accordingly, State Farm agreed to defend Wilson and Bobcat
under a reservation of rights. On October 16, 2015, it also instituted this
declaratory judgment action against Defendants to determine coverage.
However, on October 30, 2015, “Wilson and Bobcat, by and through their
personal counsel, terminated the services of the attorney[s] hired by” State Farm
after State Farm refused their request to withdraw the reservation of rights.
(See Am. Compl. 4 (¶20), ECF No. 3). The attorneys hired by State Farm thereafter
withdrew from the state court case.
Wilson and Bobcat, through personal counsel, then agreed to the entry of
judgment in the state court case in favor of the Whites in excess of $2.8 million, but
at the same time entered into a Covenant Not To Execute and/or Enroll Judgment
with the Whites. The parties in that case also filed a Motion for Entry of Judgment.
2
State Farm subsequently moved to intervene and requested a stay of that case
pending a rule on the coverage issues in this case. The state court denied the stay,
but allowed the intervention.
According to the parties, as a result of State Farm’s intervention, the Whites
rescinded the Covenant Not To Execute and moved to withdraw the Motion for
Entry of Judgment. Bobcat and Wilson also instituted a state court action against
State Farm based on its intervention for alleged tortious interference and other
causes of action. That action was removed to this Court (see Civil Action No.
1:15cv426-LG-RHW), and a Motion to Remand is pending therein.
Defendants contend that there is insurance coverage under Wilson’s State
Farm Policy for the Whites’ injuries. State Farm claims that no coverage exists
based on Policy exclusions, and that Wilson and Bobcat “fail[ed] to cooperate under
the terms of the [P]olicy.” (See Am. Compl. 5 (¶23), ECF No. 3). It has “request[ed]
a judicial determination that it has no duty to defend or indemnify Bobcat or Mr.
Wilson for any claims arising out of” the accident wherein Mr. White fell from the
bucket of a truck. (See id. at 6 (¶32)). Defendants have moved the Court to abstain
from deciding this action and, instead, to dismiss it. State Farm has opposed the
Motion, and Defendants have replied.
DISCUSSION
“The term abstention refers to judicially created rules whereby federal courts
may not decide some matters before them even though all jurisdictional and
justiciability requirements are met.” Nat’l Union Fire Ins. Co. of Pittsburgh, PA v.
3
Trotter, No. 12-2064, 2013 WL 2369800, at *5 (E.D. La. May 29, 2013). The United
States Supreme Court first announced in Brillhart v. Excess Insurance Co. of
America, 316 U.S. 491 (1942), that a district court may abstain from hearing a
declaratory judgment action involving issues of state law in favor of dismissal.
The Fifth Circuit “has established a three-step inquiry for a district court to
consider when determining whether to dismiss a declaratory judgment action
under” Brillhart. See Trotter, 2013 WL 2369800, at *2; Sherwin-Williams Co. v.
Holmes Cty., 343 F.3d 383, 387 (5th Cir. 2003). The Court “must determine: (1)
whether the declaratory action is justiciable; (2) whether the court has the
authority to grant declaratory relief; and (3) whether to exercise its discretion to
decide or dismiss the action.” Sherwin-Williams, 343 F.3d at 387.
The parties agree – and the Court finds – that the first and second steps are
satisfied. Therefore, the only issue before the Court is whether to exercise its
discretion to decide or dismiss the action based on the following nonexclusive factors
identified by the Fifth Circuit:
(1) whether there is a pending state action in which all of the matters
in controversy may be fully litigated;
(2) whether the plaintiff filed suit in anticipation of a lawsuit filed by
the defendant;
(3) whether the plaintiff engaged in forum shopping in bringing the
suit;
(4) whether possible inequities in allowing the declaratory plaintiff to
gain precedence in time or to change forums exist;
4
(5) whether the federal court is a convenient forum for the parties and
witnesses;
(6) whether retaining the lawsuit would serve the purposes of judicial
economy; and
(7) whether the federal court is being called on to construe a state
judicial decree involving the same parties and entered by the court
before whom the parallel state suit between the same parties is
pending.
Id. at 388 (citing St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590-91 (5th Cir. 1994)).
The Court has broad discretion in deciding whether to hear an action based
on these factors. See Trejo, 39 F.3d at 590; see also Grain Dealers Mut. Ins. Co. v.
McKnight, No. 398CV7DA, 1999 WL 33537200, at *1 (N.D. Miss. Mar. 1, 1999)
(discussing court’s discretion). In considering these factors, the Court is of the
opinion that it should not abstain from deciding this action. See, e.g., Trotter, 2013
WL 2369800, at *5 (“[T]he doctrines of abstention are grounded in rules of comity
and federalism, created to prevent unnecessary intrusion by the federal court into a
state’s power to hear and decide state law issues. Nevertheless, given that all Trejo
factors counsel in favor of exercising the Court’s jurisdiction, abstaining under
Brillhart is not warranted.”).
(1) Whether there is a pending state action in which all of the matters in
controversy may be fully litigated
“There is no per se rule against a federal court’s entertaining a declaratory
judgment action to determine an insurer’s liability when a tort action is pending
against its insured in a state court.” Northfield Ins. Co. v. Adams, 158 F.3d 584, *3
5
(5th Cir. 1998). While the state court could litigate the coverage issues presented
here, this factor alone does not warrant abstention. See Canal Ins. Co. v. Smith,
208 F.3d 1006, *5 (5th Cir. 2000) (“[Defendant] notes that [plaintiff] could have
possibly litigated the insurance coverage issue in the state court proceeding . . . .
However, even if this is true, this fact alone does not mandate that the district court
stay the federal proceedings.”).
Rather, the state court action only involves the underlying liability of Wilson
and Bobcat, if any, to the Whites; “the issue of coverage has not been raised in the
state court action.”1 See St. Paul Fire & Marine Ins. Co. v. Delta Kappa Chapter of
Alpha Phi Alpha Fraternity, Inc., No. 5:06cv55-KS-JMR, 2006 WL 2882288, at *2
(S.D. Miss. Oct. 5, 2006) (declining to abstain); Grain Dealers, 1999 WL 33537200,
at *2 (declining to abstain where, among other factors, the declaratory judgment
action before the court addressed “the sole issue of coverage[,]” and none of the
pending state actions included the issue of coverage); see also Sherwin-Williams,
343 F.3d at 392 (“A district court may decline to decide ‘a declaratory judgment suit
where another suit is pending in a state court presenting the same issues, not
governed by federal law, between the same parties.’”) (citation omitted) (emphasis
added). “[A] state court decision on the issues of . . . liability . . . would have no
1
Defendants rely heavily on Colony Ins. Co. v. Ambling Management Co.,
LLC, 965 F. Supp. 2d 783 (S.D. Miss. 2013). However, in Colony, unlike here, the
declaratory defendants had already filed a motion for declaratory relief in the state
court “attempting thereby to present the insurance coverage issue to the state court
for resolution.” Id. at 790.
6
direct bearing on the insurance company’s duty to defend and the scope of policy
coverage; a federal decision on the insurance issues would likewise have no impact
on the state court liability issues.” See Agora Syndicate, Inc. v. Robinson Janitorial
Specialists, Inc., 149 F.3d 371, 373-74 (5th Cir. 1998) (reversing district court’s
decision to abstain).
Furthermore, State Farm’s intervention in the state court action does not
mean that the state court will also be deciding coverage issues. State Farm did not
seek to intervene in the state court action until after it filed this declaratory
judgment action, and specifically requested that the state court stay that action
until the coverage issues could be decided. The state court’s denial of that request
does not equate to the state court deciding coverage issues which are not before it.2
(2) Whether the plaintiff filed suit in anticipation of a lawsuit filed by the
defendant
“[T]here is no evidence that [State Farm] filed for declaratory judgment in
anticipation of a declaratory lawsuit being filed by” Defendants. See Canal, 208
F.3d at *5. State Farm “did not attempt to short-circuit [the Whites’] liability
action in state court by a ‘race to res judicata.’” Id. (citation omitted); see also
Sherwin-Williams, 343 F.3d at 399 (“There is also no evidence that the declaratory
2
There is no improper claim splitting, as argued by Defendants. State Farm
did not bring the pending state court action, and its intervention therein was not to
request that the state court decide the coverage issues that it has already asked this
Court to decide. See Carpenter v. Kenneth Thompson Builder, Inc., No. 2011-CT01028-SCT, 2014 WL 4100003, at *2 (Miss. Aug. 21, 2014) (“Claim-splitting . . .
occurs when a plaintiff attempts to bring a duplicative action involving claims
arising from a single body of operative facts against the same defendants.”).
7
judgment defendants had been restricted from filing state court actions, averting
the possibility that [the insurer] was engaged in a race to res judicata.”) (citation
and quotation marks omitted). Instead, it appears that State Farm filed this action
not in anticipation of one by Defendants, but in response to the state court action.
See, e.g., AXA Re Prop. & Cas. Ins. Co. v. Day, 162 F. App’x 316, 320 (5th Cir. 2006);
Grain Dealers, 1999 WL 33537200, at *2.
The Court is not persuaded by Defendants’ argument that State Farm was
engaging in procedural fencing by filing this action before Defendants “could file
claims against State Farm for tortiously interfering with entry of a judgment
against Bobcat and Wilson . . . .” (Defs.’ Mem. 13-14, ECF No. 8). State Farm has
not asked this Court to decide any issues related to whether it tortiously interfered
with the judgment. The only issue before this Court is whether State Farm has a
duty to defend and indemnify Wilson and Bobcat, which is unrelated to the issues in
the second state court case (now pending in federal court). Regardless, “[t]he mere
fact that a declaratory judgment action is brought in anticipation of other suits does
not require dismissal of the declaratory judgment action by the federal court.” See
Sherwin-Williams, 343 F.3d at 397.
(3) Whether the plaintiff engaged in forum shopping
An insurer does not engage “in improper forum shopping merely by filing a
declaratory action in federal court availing itself of diversity jurisdiction.” AXA, 162
F. App’x at 320-21. “There is no evidence that [State Farm] brought its declaratory
8
judgment action in search of more favorable law.” See Sherwin-Williams, 343 F.3d
at 399. It agrees that Mississippi law applies. See id. (“The selection of the federal
forum in this case did not change the law that would apply; [the insurer] brought
the suit in Mississippi federal court, against Mississippi defendants. Mississippi
law would apply to the claims between the parties, whether in federal or state
court.”).
(4) Whether possible inequities in allowing the declaratory plaintiff to
gain precedence in time or to change forums exist
Again, the coverage issues in this action are distinct from the liability issues
in state court. Therefore, State Farm has “not inequitably gain[ed] precedence in
time or change[d] a previously selected forum for the declaration it s[eeks].” See
AXA, 162 F. App’x at 321; see also St. Paul Fire & Marine, 2006 WL 2882288, at *2
(“[N]o preference or precedence will be gained by [the insurer] in proceeding with
this action. It is merely an action to determine whether or not there is coverage and
an obligation to provide a defense to the . . . Defendants.”).
(5) Whether the federal court is a convenient forum
Both this Court and the state court are located in the same county.
Therefore, this factor is neutral. See, e.g., United Nat’l Ins. Co. v. Jackson
Redevelopment Auth. Bd. of Comm’rs, No. 3:14-cv-466-CWR, 2015 WL 144930, at *2
(S.D. Miss. Jan. 12, 2015).
9
(6) Whether retaining the lawsuit would serve the purposes of judicial
economy
There is currently no “action seeking to determine coverage issues” in state
court, “and it would be preferential to resolve [such] issue[s] early in this currently
pending action.” See St. Paul Fire & Marine, 2006 WL 2882288, at *2. This is not
like the situation in Colony Ins. Co. v. Ambling Management Co., LLC, 965 F. Supp.
2d 783 (S.D. Miss. 2013), where if the Court were “to retain jurisdiction over this
lawsuit, the coverage issues that [the insurer] asks this [C]ourt to decide would be
simultaneously litigated by the state and federal courts[, which] would not serve
judicial economy.” See id. at 791.
Here, there would first need to be an intervening complaint for declaratory
judgment in the pending state court case or commencement of a new declaratory
judgment action in state court. “Either of these options would be less efficient and
more economically burdensome than if this [C]ourt was to decide the declaratory
judgment action.” Grain Dealers, 1999 WL 33537200, at *2.
Nevertheless, although the state court has never been asked (through a
complaint, motion, or otherwise) to decide the coverages issues, Defendants argue
that judicial economy is thwarted because duplicative discovery will take place. It
appears that discovery has not yet begun in the state court case or, if it has, it is in
its early stages, so there is no reason that the parties cannot agree to use discovery
10
in the state court proceeding in this proceeding or vice versa.3 This factor does not
weigh heavily in favor of abstention.
(7) Whether the federal court is being called on to construe a state judicial
decree
Defendants do not address this factor, but cannot reasonably dispute that the
Court is not being called on to construe a state judicial decree in this coverage
dispute. This factor is, at best, neutral.
CONCLUSION
The Court is of the opinion that the Trejo factors weigh in favor of the Court
exercising its discretion to entertain State Farm’s declaratory action.
IT IS THEREFORE ORDERED AND ADJUDGED that the [7] Motion to
Dismiss, Or In the Alternative, Stay filed by Defendants John White, Jr., and Rita
White is DENIED.
SO ORDERED AND ADJUDGED this the 3rd day of February, 2016.
s/
Louis Guirola, Jr.
LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE
3
State Farm represents that its intervention was “for the purpose of using
discovery relevant to both proceedings.” (Pl.’s Mem. 8, ECF No. 15).
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?